Washington State Commission on Asian Pacific American Affairs Communities of Concern Commission Presentation to the Board of Directors 1
Board Presentation • Communities of Concern Commission – Who We Are • Self-Determination & Place are Important • Development Process • Financing Model • Development Risk 2
Capital Project Development Roles • Champion – Close to community served, articulates compelling need, advocates • Development Team – Scopes project, determines initial feasibility, informs sponsor, negotiates real estate, structures finance, oversees design, manages construction • Sponsor – Financial backer of the project who assumes liability and risk • Finance Team – assess feasibility, risk, capacity, resource burden and works with Development Team to assure financial viability of the project construction and operation 3
Capital Project Development Process Champion/Development Team • Notion/Concept Scoping Doc • Project Design Initial Feasibility • Champion Proposal • Mission Fit • Prioritization Finance Sponsor Team Recommendation • Feasibility • Feasibility • Capacity Sponsor Board of Directors • Finance No Review new/updated Resolutions Project Moves Contracts & Yes Agreements Forward 4
Low-Income Housing Tax Credit (LIHTC) Program • A housing subsidy program for rental housing • Created within Section 42 of the Internal Revenue Code • Administered by state’s housing finance agency – Washington State Housing Finance Commission • Each state receives $2.35 per capita annually in tax credits to allocate to projects, inflated annually • Eligibility is based on tenant income 5
What Does LIHTC Finance? • New construction and rehab projects Acquisition in some cases • Housing for families, special needs tenants, single room occupancy • and the elderly (WA state has prioritized homeless and farmworkers) • Urban, rural, and suburban locations Additional tax incentives for projects in high-cost or difficult to • develop areas; a.k.a., Difficult to develop areas and Qualified Census Tracts • 6
How LIHTC Works Rental units with tenants earning no more than 60% of area median • income • Investors earn dollar-for-dollar credits against their federal tax liability • Investors also get tax benefits from losses Generally, tax credits are received over the first 10 years of operation, • losses over 15 years • Some tax credits are recaptured by the IRS if the project does not operate for 15 years 7
Unit Restrictions • CHS/CCS makes elections as to population served in January application to WSHFC • Rent is restricted based on AMI% (Area Median Income) Seattle rent at 50% AMI for 2 bedroom with 3 people = $1,080; with max income = $43,200 • Rents And Utilities – limited to 30% of threshold income 8
Structure – Tax Credit Syndication Limited Partnership Structure: • General Partner or Managing Member (CHS or CCS) - owns just 0.01%, but controls and operates the project • Passive Limited Partner invests equity in return for 99.99% ownership • Sale to Investor Limited Partner of most of the tax credits and tax losses maximizes investor equity – More investor equity reduces other financing needs and helps project development • Investment Member is a passive investor, and gets its return almost exclusively from the tax credits and losses 9
LIHTC Investment Process 10
Capital Project Team • Development Team – Developer – General contractor – Architect – Attorney – Accountant – Property manager – Consultants 11
Development Funding Sources • Capital: – LIHTC, investors: NEF, Enterprise, BoA, banks – WA State Housing Trust Fund – City (Seattle, Tacoma, Bellingham, Everett) – County – HUD – Federal Home Loan Bank – Private grants or loans (conventional bank) 12
Operating Funding Sources • Tenant paid rent • Section 8 project based vouchers • State and local 2163 and 2060 funds • WA State Operating and Maintenance • Other private grants 13
Development Risk • Pre-development Risk: – Site feasibility – Environmental hazards, wetlands, etc. – NIMBY (Not in my backyard) • Mitigation – Hiring a consultant and specialists to identify and assess any potential environmental issues – Work with neighbors early, listen and respond 14
Development Risk • Construction: – Unforeseen conditions which cause cost increases – Pricing increases and wage rate increases – Construction defects • Mitigation: – Contingency, 10% typical – Stipulated sum contracts to lock in pricing – Use of consultants and others to assist in oversight 15
Development Risk • Rent-up Risks: – Rent to unqualified tenants – Units not rented in time • Mitigation: – Strong team to review tenant files – Allow ample time for rent-up – Budget for marketing costs and incentives 16
Equity Investor’s Approach to Underwriting • Quality of the Development Team • Project Characteristics • Evaluation of the Development Budget • Rents/Market/Marketability • Operating Costs • Reserves • Sponsor Guarantees 17
Readiness Sponsor Project Name Location # Units Population Equitable Brief Description Site Control Legislative Rating Served Housing District Fund Ask 2- Almost Community Ejido Farming TBD – N/A Farmwork $6.5 Phase 1: two to three TBD 10 & 42 acre parcels for Ready to Community 100+ er million organic farming Community Project acres Families practices. Phase 2: 20 to 30 acres for a cultural center/community space, green house, small machinery and tools storage, tortilla factory. Secure recognition, 2 – Almost Survival of Klucketsah Franks N/A Everyone $200,00 60 acres, 2 status and formal Ready American Living Landing 0 including school designation of Franks Indians Sovereignty on the grounds and Landing, its related treaty, trust and Association Legacy Nisqually substantial school lands on the Center River portions of the National Register of Nisqually River or Historic Places; planning and riverbed. supportive resources to design, build and operate the Center. Healing environment 1.5 – One With Center Swinomis N/A Indigenou TBD Swinomish Tribe 10 for the deepening of Almost Creation + h s People understanding, Ready Indigenous Reservati respect and honoring of healthy Mind on relationships Two community 3 – Not TBD TBD TBD TBD TBD TBD TBD TBD growth plan Ready processes in rural poverty areas in eastern Washington 18
Readiness Sponsor Project Location # Units Population Equitable Brief Description Site Control Legislative Rating Name Served Housing Fund District Ask 1.Shovel CHSWW and Elizabeth Henderson & Low Income $20 million Land owned to build first 75 units and Partial for 75 37 150 requesting funds to buy adjacent parcel. Equity Alliance Thomas Renton Ave. S. Ready Families units. Need Family housing strongly supported by the of WA (a Black Homes Near Rainier to buy community that’s dedicated to community Valley Light Rail addressing the mitigation of second housing Station gentrification in Rainier Valley. parcel organization) Seattle Fire Station being purchased from City. 1 – Shovel Equity Alliance Yesler and 2300 E. Yesler Low income $8 million 100% owned 37 34 23 rd Fire Phase I is business of WA Way, Seattle Ready workforce incubator/collaboration center. Phase II Station individuals is housing. 110 14 th St., 1 – Shovel Equity Alliance YK Homes Low income $12 million Purchased building that was to go 100% Owned 37 55 market rate and is now being purchased of WA Seattle Ready workforce by EAW. City partnering with EAW to build 55 new units on site 1522 14 th Ave., Church is making their land available for 1 – Shovel FAME Church FAME Family Low income $12 million 100% Owned 43 80 housing. Housing Seattle Ready working families Existing 58 units to be converted to 250 1 – Shovel FAME Housing Bryant Manor 1801 E. Yesler 250 Low income $25 million 100% Owned 37 units. Development Way, Seattle Ready working Corp families 15 th near Existing 25 units to be converted to 40 1 – Shovel FAME Housing Imperial Low income $10 million 100% Owned 43 40 units. Develop. Corp Madison, Ready working units Seattle families SeaMar Sea Mar 1040 S. Sea Mar owns the land and seeking 2 – Almost 200 Low income $25 million 100% owned 37 funds for development of a 200 Unit South Park Henderson St., Shovel Ready working Units affordable Housing Facility in South park. affordable Seattle families housing project 2522 14 th Ave. 1 – Shovel El Centro El Patio Low income Renovate an existing affordable housing 14 $737,300 100% Owned 37 complex near public transit. Apartments S., Seattle Ready families 19
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